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This is usually quarterly, but can be every half year, depending on the terms of the deal. Licensees should always comply strictly with all accounting dates and requirements and so must be careful not to agree to any accounting requirements they cannot actually fulfi l. The agreement will set out the details to be included in royalty statements. Licensees must make sure they do not promise to supply accounting information they do not have or cannot get. Any deviation or late payment could giv...

Master licences must give the licensee record company the right to make copies of the master and to sell copies to the public in the nominated territory for a nominated period of time. Aft er that, the rights will be as wide or as narrow as the parties agree. The rights granted and the degree of scope the licensee will have in dealing with the master depends upon the relative bargaining strength of the parties and whether the would-be licensor really trusts the would-be licensee. When in doub...

At each step of the chain, the party granting the rights will be a ‘licensor’ and the recipient of the rights will be a ‘licensee’. Each licensor depends upon the person before them for its rights to be valid. If someone in the chain makes a mistake or enters into an agreement that exceeds their authority, this will invalidate the rights of everyone below them in the chain. This is sometimes called the ‘withered root’ theory of copyright and is based on the...

The following aspects are essential elements of all master licences, both exclusive and non-exclusive: THE PARTIES Master licences are done at all levels of the record industry. For example, a recording made in the United States by an Independent (let’s call it Indy Co) might be:

• licensed in the United States by Indy Co to a Major in the same country (let’s call it Major Co), giving Major Co exclusive rights for the world

Like other copyright licensing, master licences can be exclusive or nonexclusive. Exclusive licences are the most common kind, although, as will be seen later, non-exclusive licences have their place. Because of the Copyright Act, exclusive licences must be written down and signed by the party granting the licence (the licensor). If they are not, they risk being unenforceable by the recipient of the licence (generally referred to as the licensee) against infringers. (The terms licensee and li...

This can be as widely or narrowly defi ned as the parties agree. If you are a licensor, ensure the defi - nition of the territory is neither ambiguous nor extends beyond the territory you actually control. If you are a licensee, you will want the widest possible territory, but your licensor will probably want the narrowest defi nition it can negotiate. Where an Independent (Indie Co) is licensing a master to a Major (Major Co), and they know Major Co’s affiliates are going to release th...

Master recordings are usually defined as ‘recordings of sound technically
suitable for the commercial manufacture of records’ or similar. Most licence
agreements also specify the format in which the master must be delivered to
the licensee.
Where the masters already exist, it is easy to identify them in the
agreement by artist and track. If the masters are yet to be recorded, it becomes
more complicated. The contract has to identify the master unambiguously.
Unless this is ...

For simplicity, the expressions ‘master recordings’ or ‘masters’ will be used here to refer to audio-only master recordings, whatever format they are in. In practice of course, masters can take many forms but these days they are usually delivered on a hard drive containing the relevant sound fi les in digital form. Even commercial compact discs are occasionally used when the original masters cannot be located. Master licences deal with the end result of th...

Th e retailer buys the records in accordance with the distributor’s ‘trading terms’. These are the rules that regulate the distributor’s interaction with its customers (the retailers). Th e terms of trade determine:

• how records are ordered by the retailers

• how and when they will be delivered

• if and how records may be returned by the retailer

• when and how the retailer pays for them. You have to accept that the dist...

Like most things in the record industry, the fee the distributor wants in return for its services is negotiable. It will vary according to your bargaining strength and the amount of work the distributor will have to do to get its fee. Th e more it does, the more it will charge. You have to decide what work is genuinely extra and what work is routine and eff ectively not costing the distributor anything it would not ordinarily spend anyway. Hanging out for a bottom-line fee will be false econo...

Most P&D deals give the distributor ‘the exclusive right to distribute’ in the nominated territory. Th is is not a copyright licence, but is still enforceable as a condition of the contract. If you think you will want to distribute any recordsnyourself, then reserve that right in the contract. Th is right can be particularly useful if you do a lot of live work and can sell records aft er the show. You might even be able to arrange some to be sold through mail order or via your...

It is in your interest to keep tight reign on the number of promotional copies, including limiting copies that can be ordered by your distributor’s staff . There is certainly promotional value in having the record available to the staff , even if they do not pay for it, but the numbers have to be reasonable. Any records given away free by the distributor should be exempt from its distribution fee (or subject to a reduced fee). You should try to retain suffi cient copies to meet promotio...

Most distributors will try to put the responsibility for stock control back onto you. This means the distributor will not order new stocks unless you say to. You have to watch the stock levels and sales trends constantly. If, for example, you have a big promotional campaign planned, don’t forget to top-up the stock levels or to prepare your manufacturer so it can respond promptly to orders for additional stock if needed. A well-advertised but out of stock album is an embarrassing thing ...

The label needs suffi cient funds to run its infrastructure and make recordings. There is no future for the deal if the Major keeps the purse strings so tightly drawn that the label slowly starves. Good budgets are essential, so the Independent can make a realistic estimate of its needs. In most deals, all the funds advanced by the Major will be recoupable from all royalties payable to the label. Th is is usually called a ‘cross-recoupable’ deal because all royalties, regardless o...

You pay for the records, so you own them. You should always have final say as to how they are to be sold, though this has to be consistent with the distributor’s methods and trading terms. Make absolutely sure that the distributor knows that you, not it, own the records. Otherwise, your records may be gathered up inadvertently in the course of a warehouse clear-out (which distributors regularly do to remove surplus stock). Stocks of your records may be scrapped along with the distributo...

In P&D deals, the owner gets most of the proceeds from each sale. Up to 70%–75%, depending upon the distribution fee. Before you get excited though, remember that out of that 80%, you still have to pay:

You can go via the independent distributors or you can go for one of the Majors that still off er P&D deals. Some will only do master licence deals. Others will also give you the option to fl ip a P&D deal over to a licence deal, should sales really take off . You have to shop around. Find out who their main customers are. The Majors deal with traditional record outlets but tend not to deal with independent outlets. Independent distributors sometimes do not supply major retail outlets...

Under a P&D deal, you own the master recording from which the records are made and also the records themselves, at least until they are sold to retailers. In a master licence deal, however, the record company pays for the records and owns them. This makes the record company worry about the number pressed, the number sold and any returns. In a P&D deal, the distributor just keeps the records in the warehouse and ships them out to meet demand whipped up, no doubt, by your brilliant prom...

Pressing and Distribution deals are usually abbreviated to ‘P&D deals’. You need to be careful with the terminology though. Th e term is a bit rubbery. Some people use it when they actually mean a master licence deal. Th is can cause confusion because there are quite fundamental diff erences between P&D deals and master licences. Th is will become clear as we get into this chapter. For the moment, just remember: P&D deals do not involve the licensing of copyright but r...